Tesco is poised to make a decision on the size of a potential multi-billion
pound investment in India following representations by David Cameron as part
of a UK trade mission.

The Sunday Telegraph understands that Philip Clarke, the chief executive, has spoken to the Prime Minister in the past few days regarding the retailer’s hopes for opening stores under its own name.

Mr Cameron, who begins a three-day visit to the country tomorrow, is believed to have committed to Mr Clarke that he would press his Indian opposite number, Manmohan Singh, about the opening up of foreign direct investment (FDI) channels for British retailers.

If the Prime Minister is able to secure the right assurances, a decision on a major Indian investment programme could be made by Tesco’s board as soon as this summer, sources indicated. Although laws were recently relaxed to allow foreign retailers to own a majority stake in a domestic retailer, the British retailer is concerned about the costs and impositions the Government will place on it should it decide to go it alone.

As part of this renewed push, Mr Clarke is understood to have met with Anand Sharma, India’s minister of commerce and industry, during his visit to London a week ago.

During that conversation, Mr Sharma is believed to have stressed that the interpretation of these rules is up to individual states.

A Tesco source indicated that it is working hard to reach a decision to invest further in India, once it has had clarification on a number of fronts. The same source suggested that while that decision could be made later this year, it is dependent on the right backing from the Indian government. Tesco first entered India in 2003, through an earlier partnership with Tata & Sons, but has felt restricted by the onerous laws which have, until recently, prevented wholesale investment.

Although it is not known exactly how much the British retailer might invest in the country, any investment is likely to be sizeable if it is to gain a strong foothold.

The Sunday Telegraph reported in December that Mr Clarke would prefer to expand into the major cities of Mumbai and Bangalore initially. The state of Maharastra, within which Mumbai sits, is very open to FDI. Mr Cameron is expected to use the trip to press the case for New Delhi to revive interest in British-backed Eurofighter jets over France’s Rafale jet.

The trip follows Friday’s announcement that India wants to cancel a $750m (£483m) deal for a dozen helicopters made by AgustaWestland, the Anglo-Italian subsidiary of Italy’s Finmeccanica, over bribery allegations.

The Prime Minister is also expected to promote the Eurofighter jet, after Francois Hollande, the French president, failed during a trip to India last week to sign an $11.5bn deal to sell it 126 of its Dassault Aviation jets for the Indian Air Force. The Indian government has previously indicated France’s Dassault is its preferred provider, but Mr Cameron will point to the advantages of the Eurofighter, made by a UK-Spanish-German-Italian consortium.

Delegates on the trip include Peter Sands, chief executive of Standard Chartered, who is co-chair of the India UK CEO Forum, as well as other ministers and a number of small businessmen.

One of the trip’s delegates, Lord Bilimoria, chairman of Cobra Beer, said current bilateral trade between India and the UK, which has more than tripled to over £16bn in the past decade, “is only beginning to scratch the surface” of the potential.

Writing in The Sunday Telegraph, he warned British companies risk falling behind in the “global race for the key emerging markets” if they are not bolder when presenting themselves overseas.